Nifty 50 & Sensex Explained in Hindi - #4 MASTER INVESTOR - YouTube

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Hello, my name is Mukul, and welcome to Asset Yogi where we unlock finance knowledge.

In this video, we will talk about Sensex and NIFTY

First of all, we will understand its concepts and what they are exactly

And after that, we will try to understand why people are so obsessed with NIFTY and Sensex.

And why so many people follow them.

Many times people ask that suppose if Sensex is the index of 30 companies

then those 30 companies should be affected

I have invested in a particular company so why does my stock get affected?

No, it's not like that

Many times, a sentiment of the market called group psychology.

You must have heard a proverb "all ships rise with the rising tide "

So when there is high tide, all the ships rise with it.

And with the low tide, all the ships also go down.

Similarly, if the Sensex or the market does very well,

then sometimes bad companies also rise with it.

And sometimes when the Sensex goes down, many good companies also go down.

And in that, it becomes very important for you to analyze.

So we talk about analysis on this channel, and

in this video, we will understand the concept of Sensex and NIFTY better.

And so that you have a better understanding of sentiment and group psychology.

So without any delay let's move to the blackboard.

So let's understand Sensex and NIFTY with an example.

I give you an analogy, suppose, your health worsens, then you go to the doctor,

the doctor checks your temperature, checks your blood pressure or

the doctor asks you to bring your blood report or to check your blood sample.

from all these parameters or matrix the doctor get to know your health

Similarly, if you want to find out the country's economic health

then you can track the stock markets of that country

Now how to track the stock market

If we talk about India, you can track the market through Sensex and NIFTY

Sensex and NIFTY are the two major indexes of India.

Now, What are the Major Stock Exchange in India?

Sensex is the index of the Bombay Stock Exchange.

And National Stock Exchange's major index is called NIFTY

Sensex is the short form of Sensitive Index

And NIFTY is the short form National Fifty.

In the Bombay Stock Exchange, 5000 plus companies are listed

And in the National Stock Exchange, 1600 plus companies are listed.

So you can not track 5000 companies if you want to know the economic health

Right, so what you will do? you will follow a particular index

So Sensex is the index of top 30 companies

Out of all the companies listed on the Bombay Stock Exchange

It is the index of the top 30 companies that the Bombay stock exchange select.

Now how these top 30 companies got selected in Sensex ?

It is selected by the Free Float Market Capitalization.

In which all sectors are presented and the market leader and big companies

of every sector are selected according to the turnover.

Similarly in the NIFTY top, 50 companies get selected

out of these 1600 companies which are listed on the National Stock Exchange.

Out of them, the top 50 companies get selected.

So the NIFTY is the index of top 50 companies and Sensex is the index of 30 companies

Now let's discuss the base year

You must hear that Sensex is running at 30 thousand or 35 thousand.

But when did it start? And what is its starting figure?

So we know that from the base year. Sensex was started in 1978-79

therefore the base year of it is considered in 78-79.

And its value then was Rs 100.

Similarly, the nifty base year is 95-96 and its base value was @1000.

And if we want to understand this in more detail.

So assume the value of Sensex is 100 Rs in 1979

So on today's date, we say the value of Sensex is around 35000 Rs in 2018

So see, how much of growth it is

If you calculate its compounded annual growth rate

So it will be approximately more than 16%

Every year it has given the return of 16%

So in 1980, it was 116 Rs

And then again 16% returns on 116 Rs,

In this way, 16% will be the compounded annual growth rate

Similarly, you can calculate the growth rate of NIFTY also

It was 1000 Rs in 1995-96, and today its more than 10000 Rs

So how much will be our compounded annual growth rate

So see, Sensex covers large-cap companies

It covers the top 30 companies

Similarly, NIFTY also covers large-cap companies, top 50 companies

But there are different sectoral indices

If you want to track only the auto sector, assuming Tata Motors, Hero Moto Corp

And all these automobile companies

If you want to know the condition of the auto sector

Then you can follow auto index

Similarly, power index is also published

Bankex is your banking index

Then your mid-cap and small-cap index are also published separately

Both Bombay Stock Exchange and National Stock Exchange

Publishes their index separately

Similarly in National Stock Exchange also you can follow the auto index

You can follow the power index, bank, mid-cap, small-cap

If you want to track healthcare you will get healthcare

You will get power

In this way, you can track different sectors

So this was all about the comparison between Sensex and NIFTY

Now we will see some salient features of Sensex and NIFTY

Firstly, as I told you that they are calculated by the Free Float Market Capitalization method

The top 30 companies which come under this,

Or the top 50 companies which come under NIFTY

Free Float Market Capitalization means whatever the total market capitalization of one company

Out of which the share of promoter or government's share

Assume there is a company of government, a semi-government company

Then you subtract the holdings of the promoter or government

Because the promoter or government's holdings share does not get traded in the market

So the shares which get traded in the market

Their market capitalization is calculated

According to that, top 30 or top 50 companies are selected

Now, what is market capitalization?

I have already made a very detailed video about that

You can watch the video

Along with that, I will also make a detailed video about the Free Float Market Capitalization

You can watch the video that exactly how these companies get selected

What is the second salient feature

As I told you that Sensex and NIFTY represents all the major sectors

You can see all the market-leading companies

For example, if we talk about tech then you will find a company like Infosys, TCS, Wipro

Then if we talk about petrochemical companies, you will find Reliance,

You will find ONGC

If we talk about engineering and construction then you will find companies like L&T

If we talk about banks, then you will get to see a bank like HDFC

You will get to see ICICI

So these are the top companies which you will get to see in Sensex and NIFTY

After that, one more thing you should understand carefully

Sensex and NIFTY are providing sentiments of the public

This is not the index of government that is being published

This is a sentiment of the public

The buying and selling going on the daily basis

According to that, this index goes up and down daily

So if we say that Sensex has gone up today, assume it has gone up

Then you will get to see it in green

This means that the bull market is going on now

If you assume that Sensex is going up for a year or two then we call it a bull market

If it goes down, we call it bear market

Whenever there is a down market, then you will get to see it in red color daily

So if the market goes down for many days

So we call it a bear market

And if the market keeps going up for a few months then we call it a bull market

So how the market is going up or down ?

This is the sentiment of the public

How are the sentiments of the public is controlled?

It is controlled by the socio-political environment

Assume if there is a stable government,

so when a stable government comes to the power with a full majority

Then suddenly the stock market goes up

You may have seen when the Modi government came to the power with a full majority

Suddenly the stock market went up.

In fact when the Congress government came to the power in 2004

It was a stable government, then also stock market went up

This may also be possible that a particular government has a specific image

That it is pro-business

If the government supports business,

then also the stock market goes up

So it depends on the socio-political environment

Then how are the business policies in any country

Now see earlier the image of India was that

There are not very good business policies

Startups don't get supported much

Or there are many hurdles in starting a business

So its ranking has improved a little bit

In today's date, many businesses want to come to India

By that also stock markets get affected

It is very much dependent on the international affairs

In today's date, the world's markets are interlinked very much

China is selling the products in India

It is selling their manufactured goods to the whole world

USA's technology is being used by India and the whole world

So when one economy goes down, the other economies also get affected

So what is the future of the industry

In the last 25 to 30 years, technology has done many wonders

Similarly, the future may be of renewable energy

Look for which industry will flourish in future

And in that who will become the market leader

Similarly what will be the future of a country ?

As I have told you here that a socio-political environment

and the future of the country is somewhat interlinked to one another

The country's future can be dependent on the resources also

How are the natural resources there?

is the economy agricultural dependent?

are they fully utilizing their resources or not

According to all these factors, the public sells and purchases stocks

And if the sentiments get nasty, then the stocks are sold more

And the market goes down

There's is one more proverb about Sensex and NIFTY or markets

Generally about stock markets

That markets move in excesses

What is the meaning of this?

When there are positive sentiments, then markets go up to 30% in a year

It may be possible that the earnings have gone up to only 10%

And maybe the market has gone up to 30%

It may be possible that people think that the government is very stable

We should react suddenly, there will be more purchasing of stocks

Then, in negative sentiments, the market is down 20%, 30% down also

It may be possible in this case also earnings have gone up by 10%

Then also if there are negative sentiments

The market can go down

I will give you a real-life example of this

You have surely heard of the subprime crisis

Subprime crisis occurred in 2008 and 2009

In 2008, if we talk about January then the Sensex was approx 21000

And till September 2008, the Sensex came to approx 9000

So see, how much it dropped

It's not like the earnings have dropped

The subprime crisis occurred in the USA, it affected India also

Because many companies do business among themselves

So it felt like outsourcing jobs and businesses will end

So there is a very big impact of sentiments on the market

Markets always tend to overreact

That's why the market always moves in excesses

Whenever the market goes very low

In September 2008, there was a bear market

So there is an opportunity for you

Whoever has purchased the stocks in September 2008

They may have earned very good returns

Similarly, whoever has invested in January 2008,

They may have faced loss

And it is also possible that they have sold the stocks till September 2008

So definitely if someone buys at 21000 and sells at 9000

Then there is a huge loss

So I think you may have got the idea that exactly what the Sensex and NIFTY represents

See as I have told you in introductions also

If you look at a company's earnings

If I give you an example of a company

If there is company A, its earnings may have gone up by 50% in 2008

But it doesn't depend on that

Its fundamentals are very strong

I also agree to that

But the sentiments have gone worse

Its earnings have gone up to 50%

But its stock may fall by 25%

This too is not big deal

I think you have got the idea of how important group psychology and sentiment are

And the Sensex and NIFTY are the sentiments of the public

It is neither government's published rate

nor a government's published index

I have tried to cover all the major points in this video

But then also if there is something missing or you want to add something

Then you can comment it below

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